Commercial REITs in 2Q17: A Close Look at the Top 3

How Commercial REITs Compare to Each Other

By Jennifer Mathews
|
Aug 11, 2017 3:51 pm EST

Price-to-FFO multiple

The performances of Simon Property Group (SPG), Vornado Realty Trust (VNO), and GGP (GGP) can be best interpreted by their price-to-FFO (funds from operations) ratios. This ratio gives an indication of how much an investor is paying for every share of a company’s profits.

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VNO has the highest price-FFO multiple

Vornado seems to be the most premium in terms of price-to-FFO multiple. The REIT currently trades at 17.99x. Its recent disposition of its Washington business and its transformation into an exclusive New York company with a high demand for its office spaces must have made investors optimistic about the company. That was reflected in the price movement of the stock.

SPG currently trades at a price-to-FFO multiple of 14.38x. Its higher leasing activities in order to boost sales coupled with its expansion and development projects have triggered a spike in its stock. The company has also enhanced its fiscal 2017 guidance, which has made investors optimistic about the performance of the company.

GGP has a price-to-FFO multiple of 13.73x. It reported mixed results in 2Q17. However, the relocation of its properties to high-demand localities and its optimistic guidance for fiscal 2017 have made investors optimistic about the stock.

EV-to-EBITDA ratio

GGP has the highest EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 21.11x. It’s followed by VNO with an EV-to-EBITDA multiple of 20.28x. SPG has the lowest EV-to-EBITDA value of 18.00x.

SPG, GGP, VNO, and Prologis (PLD) together make up 14.0% of the Vanguard REIT ETF (VNQ). VNQ has a yield of 4.3%.